Articoli Correlati: UNIDROIT - azionisti - accordi internazionali - commercio internazionale - accordi
1. Preamble - 2. Shareholders’ agreements and national laws: lack of uniformity and possibility of strongly diverging approaches - 3. Shareholders’ agreements from an international perspective - 4. The uncertain determination of the law applicable to international shareholders’ agreements in the absence of an express choice-of-law clause: lex contractus or lex societatis - 5. The need for an international shareholders’ agreement in a hypothetical case involving a corporate joint venture - 6. The need for an international shareholders’ agreement in a hypothetical case involving an international investment for the purchase and resale of the control of a foreign non-quoted company - 7. The options open to the stipulating shareholders in choosing the legal format of their shareholders’ agreement in each of the two outlined hypotheticals: general remarks - 8. (sequitur): in particular, the dilemma between choosing a State law as applicable law or the UNIDROIT Principles as applicable rules of law and the importance of making a parallel choice of a judicial or arbitral forum - 9. Why the UNIDROIT Principles should be chosen as rules of law coupled with an international arbitration clause - 10. Are there cases in which the choice of the UNIDROIT Principles coupled with an international arbitration clause is unadvisable? - 11. Grounds of potential illegality affecting shareholders’ agreements of the kind referred to in the two outlined hypotheticals
Shareholders’ agreements are quite common in many legal systems but their treatment in law is far from well settled. In the first place, it is no easy task to define with anything approaching accuracy what exactly constitutes a shareholders’ agreement, since such agreements vary widely as to their content, depending on the circumstances and in particular on the goals pursued by the shareholders stipulating them. In very broad terms, they may be described as agreements that are entered into by and among some (and sometimes all) shareholders of a company and pursue the objective of obliging the stipulating parties to exercise certain rights or powers (in a broad sense) stemming from the rules governing the company in the manner provided for in the agreement. Inevitably, owing to this characterizing feature, each and every shareholders’ agreement is a contract functionally linked to the company constituting the “source” of the corporate rights, powers or, more generally, situations that the agreement seeks to regulate. For the sake of brevity, I shall hereinafter refer to such company as the source company. As a result, shareholders’ agreements are, so to speak, conceptually located in a sort of no-man’s land which, although contiguous, is situated outside the ordinary boundaries of both contract law and company law. Compared to ordinary contracts, which are almost exclusively governed by what the parties have agreed upon, shareholders’ agreements appear to be different in nature, since their functional link with the source company makes their validity and/or enforceability, as well as the interpretation of their prescriptive contents, partly or in some way dependent on the interplay with the rules of company law. At the same time, although they aim to regulate or predetermine the results of the exercise of rights, powers or prerogatives granted by company law, they are generally not viewed as part of the system of rules ensuring the governance of the source company in accordance with company law. Rather, they are viewed as an external contractual constraint on the internal exercise (i.e., within the company) of corporate rights or powers (in a broad sense) vested in the stipulating shareholders. On the whole, owing to their close ties to both contract law and company law, the intrinsic nature of shareholders’ agreements is ultimately hybrid and ambiguous. This may be a [continua ..]
As mentioned at the outset, the fact that shareholders’ agreements are universally known coexists with the fact that their treatment in law is often uncertain in many respects. This is true both at the level of individual national laws and (even more so) at the international level. The attitude of national laws towards shareholders’ agreements may vary from open hostility to more or less flexible tolerance within more or less defined limits. In some more liberal systems and particularly in recent years, that attitude may even be one of benevolence in principle, pursuant to the growing recognition of the role of party autonomy, subject only to such public policy exceptions as may be found to be equally applicable to any other sort of contracts. This is neither the time nor the place to launch into a detailed comparative law analysis of the many debates and controversial issues that are still open in relation to shareholders’ agreements in many legal systems. Nor is it possible to present a complete gallery of the positions taken by each of the major national systems in terms of overall assessment of the legal treatment to be applied to such agreements. Suffice it to say that the prevailing trend among the major legal systems favours the adoption of a cautious liberal approach, based on three broad concepts, namely (i) recognition in principle of the validity of these agreements; (ii) enforceability thereof through damages in the event of breach but unenforceability through the remedy of specific performance; and (iii) continuing exposure of some of these agreements to nullity or annulment or unenforceability on public policy grounds. In connection with this last remark on public policy, mention must be made at least in passing of the possibility of shareholders’ agreements being found to be contrary to the public policy of a given jurisdiction on grounds other than conflicts with mandatory rules of company law, for instance because they substantiate an entente in violation of antitrust law or because they constitute an agreement in breach of market rules as applicable to quoted companies or to companies controlling quoted companies. For the purposes, however, of the specific points I would like to address today, the crucial factor to be kept in mind is the lack of uniformity of national laws in this area and, even more so, the possibility of drastically diverging solutions among them. Thus, Country A may view and [continua ..]
From an international perspective, the legal difficulties and uncertainties associated with shareholders’ agreements are even more severe than those encountered in an entirely domestic context. As will be more fully discussed later, difficult issues may arise when the parties to a shareholders’ agreement expressly choose as the governing law of that agreement a law other than the lex societatis, i.e., the law governing the status of the company as a juridical entity as well as a number of typically related corporate issues (such as, in particular, internal governance and liability towards creditors and third parties). In general terms, the basic reason for potential conflicts in this case is the difference in the values and interests that are protected by the lex contractus (i.e., the law selected to govern the shareholders’ agreement) and, respectively, by the lex societatis. The latter, which is supposed by national legislators to strike a fair balance among the (partly competing and partly concurring) interests of the shareholders at large, the creditors and (in a growing number of company law systems) the stakeholders who are interested in the welfare of the company as a social institution may be reluctant to allow the lex contractus to bring pressure to bear in order to achieve results that may protect the values and private interests of the stipulating shareholders much more than, or at the expense of, the other values and interests that are protected by it (i.e., by the lex societatis). It is true that in many cases the conflict may prove to be more abstract than real and ultimately not so difficult to reconcile as might appear at first sight. But it cannot be denied that a potential for difficulties exists that deserves to be identified and placed in perspective from the very outset. Surprisingly (or perhaps not so surprisingly, depending on how familiar one is with the conflict-of-laws approach to legal problems), the difficulties are much more serious when an international shareholders’ agreement (i.e., an agreement that cannot be characterized as entirely domestic, owing to relevant links to more than one legal system) is stipulated without the insertion of an express choice-of-law clause. While it is true that silence as to the law governing the shareholders’ agreement will, in many cases, result in a finding that such law must be deemed to be the same as that [continua ..]
The core originating factor of the difficulties encountered in identifying the proper law of a shareholders’ agreement where the parties have failed to include an express choice-of-law clause is a factual datum mentioned at the beginning of this paper, namely the fact that such agreements tend to vary widely as to their content. In fact, it is this potential variety that makes it impossible or at least logically unconvincing to determine, ex ante and in the abstract, i.e., without taking into account the actual contents of a given agreement in a particular case, whether the rationale for applying to it the lex contractus is stronger that the rationale for applying to it the lex societatis, or vice versa. An example may be helpful in clarifying the point I am trying to make. A shareholders’ agreement providing for a tag-along right, i.e., for the right of the minority shareholders to co-sell their shares on an equal footing with the majority shareholders if the latter find a purchaser of the company’s control, may be plausibly characterized as an agreement dealing exclusively or essentially with the individual property rights and the purely monetary interests of the minority shareholders, so that the most rational proper law for this agreement would appear to be the lex contractus, to be identified in accordance with the full panoply of rules of conflict that are applicable to contractual obligations. However, it is much less evident that this would also be the proper conclusion with respect to a shareholders’ agreement compelling all the stipulating shareholders to vote as decided by the majority of them prior to the general meeting. Here, the fact that the right that is disposed of is not a purely monetary and individual property right, but rather a collective or class right the exercise of which strongly affects the interests of others (both within the circle of stipulating shareholders and outside it) may arguably cause the pendulum to swing towards the rationale of applying the lex societatis, as opposed to applying the lex contractus. More specifically, it is not unreasonable to conclude that for the purpose of determining whether a voting agreement is valid and enforceable, the proper law for adjudicating the issue must be the law that grants the collective right to vote and protects the integrity of the voting system, i.e., the lex [continua ..]
For the sake of greater clarity, I will develop my reasoning with the help of two hypotheticals that I consider to be illustrative of highly typical and fairly frequent situations. Consider, first, the case of, say, four companies, each operating in different countries and each governed by a different national law, who form a consortium with a view to presenting a joint bid for a large public works contract in a country where none of the four companies is operative. Suppose, further, that their bid is successful and that they are awarded the contract to carrying out the work pursuant to the international practice known as project financing. The four companies must then enter into a joint venture agreement, and the circumstances of the case may well make it unavoidable for them to deviate from a purely contractual joint venture agreement and to resort, instead, to a model of corporate joint venture providing for the incorporation of a Newco in (and under the laws of) the State where the project is to be carried out. In a situation of this kind, there may be compelling reasons for stipulating an umbrella shareholders’ agreement, essentially providing for governance of the locally incorporated JVC on the basis of the “private” contractual rules specifically stipulated in that agreement, as opposed to simply letting the JVC be governed by the general rules of the company law of the host country. The main (but not sole) reason for doing so is that in this case the obligations of the joint venturers/stipulating shareholders vis-à-vis the principal under the construction contract are by far the dominating factor, whilst the incorporation of the JVC is merely instrumental to compliance with those obligations. It follows that the allocation of tasks and risks among the joint venturers and the manner in which the JVC must implement their common interests in performing the construction contract in accordance with that allocation are much more safely regulated ex ante by contractual agreement among the parties than by simply deferring to the potentially different results of the “free” operation of the various decision-making rules provided by the local lex societatis. Realistically, therefore, the joint venturers will conclude that a shareholders’ agreement providing contractual non-corporate rules for the “real” governance of the JVC is necessary and indispensable. [continua ..]
Consider the case of four financial companies (merchant banks or private equity funds), each operating in a different country and each governed by a different law. A market opportunity arises in a fifth country, where majority control of a non-quoted and badly managed company, with currently low share values but high recovery potential, is for sale. None of the financial companies is willing to go it alone but all are interested in jointly buying the company’s control, putting new and aggressive management in place and hopefully re-selling control of the acquired company at a significant profit within a relatively short time. There are obvious structural similarities and dissimilarities with the previous hypothetical. The major structural similarity is that, here again, without an ex ante contractual regulation of how the joint investors are to exercise their rights and powers within the company to be acquired, it is unrealistic to expect the deal to be equally attractive to all of them, or indeed to expect it to be attractive and feasible at all. The major dissimilarity is that the joint investors aim to take over and exercise control over an existing company that has minority shareholders, a plurality of additional stakeholders and, one might say, a history and an identity predating the foreign investors’decision to intervene. Thus, in addition to the issues that are equally intrinsic in the preceding hypothetical (which contents, which law and which forum should be selected for the shareholders’ agreement), the situation envisaged in the second hypothetical triggers an additional query, i.e., whether the different spectrum and the different quality of the interests that may be affected by the shareholders’ agreement require or justify different and special legal considerations. In my opinion, this is the case, at least in part, as I will try to argue.
From the standpoint of the joint venturers or the joint investors in my two hypotheticals, the determination of the substantive content of the shareholders’ agreement is inextricably interwoven with the issue of the applicable law and the available forum or fora. For the reasons that I will expound in a few moments, I will focus my analysis on the situation where the lex societatis, i.e., the national law of the State whose rules govern the company, is hostile to recognizing (or does not recognize to the full extent required by the stipulating shareholders) the validity and/or enforceability, in whole or in part, of the provisions of the shareholders’ agreement. Faced with this obstacle, the joint venturers or the joint investors must choose among three realistic options. The first option could be that of stipulating the shareholders’ agreement without inserting any clause expressly choosing the law and the forum, thus effectively relying either on (i) the future spontaneous observance of the contractual provisions by the stipulating shareholders, notwithstanding the potential unenforceability of such provisions before the courts of the State whose law is the lex societatis; or (ii) the enforceability of such provisions before a different court and under a lex contractus found by such court to be applicable to the agreement notwithstanding the conflict with the lex societatis governing the source company. The second option would consist in inserting in the shareholders’ agreement an express choice-of-law clause designating as the lex contractusapplicable to it the national law of a State recognizing the validity and enforceability of the provisions of the agreement and giving effect to it to an extent satisfactory to the stipulating parties. Essentially, this option would directly and expressly pursue the hoped-for result under point (ii) of the preceding option. It should be added, however, that once the route of adopting an express choice-of-law clause has been chosen, it would be only logical and consistent with the efficient pursuit of the desired objectives to go one step further and expressly choose also a judicial or arbitral forum for future disputes under the agreement in a State that would not consider as contrary to its own public policy or its own international obligations of comity the rendering of a judgment or award enforcing such an agreement or any of its [continua ..]
The first option cannot be recommended as it presents several obvious disadvantages. As shown above, the lack of an express choice-of-law provision may give rise to difficult characterization issues and as a consequence, to the possibility of serious uncertainties as to the applicable law. In addition, silence on the issue of the applicable law may even engender doubts as to the existence of an underlying legal intent supporting the agreement. In other words, depending on the circumstances, it is not inconceivable that a disappointed stipulating shareholder may seek to argue that the shareholders’ agreement was nothing but a mere gentlemen’s agreement without binding legal force, as in fact allegedly confirmed by the absence of any reference to a governing law or a competent forum. Lastly, if the assumption or hope behind silence on the applicable law is that there may be a competent court (other than a court of the State of the lex societatis) that could or will ultimately uphold the validity and enforceability of the shareholders’ agreement by applying to it a proper law other than the hostile lex societatis, then it is only reasonable to do all that is practically possible to reject the silence option and convert the aforesaid hope or assumption into an express choice, reflected in a clear clause on the law and the forum. Having thus excluded the reasonableness or attractiveness of the first option, there remains to be considered the more sensible and realistic dilemma between the second and third options, namely, either (i) the express choice of a national law other than the lex societatis as the lex contractus of the shareholders’ agreement; or (ii) the alternative express choice of the UNIDROIT Principles as rules of law governing the agreement. In either case, as already mentioned, the issue of the applicable law is to a very large extent commingled both in theory and in practice with the parallel issue of choice between a judicial or an arbitral forum. To dispel any doubt, I will not proceed to the final analysis of this dilemma without first restating an obvious point, namely that all cases where the lex societatis is expressly chosen as the national law also to be applied to the shareholders’ agreement require neither special attention nor comment. There may be situations where this is a perfectly sensible choice. However, when this kind of choice is made, the [continua ..]
The fundamental reason why the joint venturers or joint investors should be advised to opt for the express choice of the UNIDROIT Principles in combination with international arbitration is the higher likelihood that their contractual will, as expressed in the shareholders’ agreement, will be recognized and given effect to the maximum extent that is legally and practically obtainable. In saying this, I am obviously not implying that the alternative option of selecting a specific national law is necessarily unsafe or risky from the standpoint of the stipulating shareholders. The difference is merely one of degree – a degree that may be marginal yet conceptually perceivable. If a given national law is expressly selected as the applicable law on the ground that it is favourably disposed towards shareholders’ agreements, that national law may still have a rule for domestic shareholders’ agreements that does not coincide with the express or implied rule for international cases. In other words, it is perfectly conceivable that the national law selected as lex contractus fully recognizes and gives effect to domestic shareholders’ agreements, i.e., agreements relating to a source company governed by the same national law as lex societatis, yet takes the opposite approach with respect to shareholders’ agreements relating to foreign source companies. Obviously, the rationale for adopting these diverging rules would be the willingness of the State whose law has been chosen as lex contractus to give recognition and assistance in international cases to the strong contrary policy adopted and forcefully pursued by the State of the foreign lex societatis. In substance, this is the kind of solution that was permitted, not to say prescribed, by Article 7 of the Rome Convention and that is now covered, although in somewhat different terms, by Article 9 of the Rome I Regulation. I hesitate to offer a guess as to whether or not the risk of the aforementioned outcome is realistic or largely theoretical. I am inclined to think that it is more likely to be the latter. However, as hinted above, even a marginal risk is a risk and prudence suggests that it should be avoided by making the alternative choice in favour of the UNIDROIT Principles, coupled with the adoption of an international arbitration clause. Turning now to the affirmative reasons for choosing [continua ..]
As a final consideration in contemplating the advisability of choosing the UNIDROIT Principles as rules of law governing an international shareholders’ agreement, a few words must be spent on the issue of whether there may be situations in which making this choice is (or may on balance be considered) unadvisable. A clear case for not adopting the Principles as rules of law coupled with international arbitration is the risk of unenforceability of the award that may be rendered on the ground of non-arbitrability under the law of the State where the award is to be enforced. It must be borne in mind that there are still countries (e.g., Russia) that consider all or most company law matters as non-arbitrable owing to the alleged “public” nature of the interests administered or affected by company law. As mentioned above, the characterization of a dispute concerning a shareholders’ agreement may be open to uncertainty; and if that uncertainty were to open the door, in the State of the potential future enforcement, to a defense of unenforceability on grounds of non-arbitrability of the matter based on a preliminary characterization as a corporate issue, whereas the same objection could not be raised ex hypothesi against a judgment rendered on the same issue by a judicial court in application of an expressly chosen State law, then it may be reasonable to conclude that the safer choice is not to adopt the otherwise recommended coupling of UNIDROITPrinciples with international arbitration. That conclusion would not, however, be justified if the argument brought in support of the non-adoption of said coupling were the alleged “lack of safety” per se of the choice of the UNIDROIT Principles as rules of law. It is true that while there is increasing support for the view that, when so chosen, the Principles are a valid self-standing alternative to having a State law as applicable law (see, in particular, Art. 3 of the latest version of the “Draft Hague Principles on Choice of Law in International Commercial Contracts” approved in November 2012), there are still many scholars who voice their doubts and take the view that the Principles can at best only be incorporated as terms of contract in the agreement calling for their application, which agreement may only be governed stricto sensuby a State law, as designated by the relevant conflict rules. The answer [continua ..]
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